How enterprise blockchain supports sustainability

How enterprise blockchain supports sustainability in your company

Emerging technologies are reshaping society and blockchain can transform organizational practices to help achieve sustainability goals.

In brief

  • Enterprise blockchain technology can help drive sustainability value in several areas, such as validating sustainability claims.
  • It can potentially play a key role in track and trace systems, voluntary carbon credits tracking, and renewable energy credits tracking.
  • Organizations must address challenges in adoption as they seek to use blockchain to enhance value chains and help achieve sustainability goals.

Blockchain technology was first introduced in 2008 for cryptocurrency transactions in the financial industry. Its core features include transparency, tokenization, traceability, security and reliability. These unique characteristics have enabled organizations to create a tamperproof record of transactions that is decentralized and accessible to all participants in an ecosystem. Thus, blockchain technology soon gained traction as a solution for various business challenges from supply chain management to data security.

How EY can Help

As the world faces increasingly urgent sustainability challenges from climate change to resource depletion, organizations are now looking for new ways to enhance sustainability efforts. Enterprise blockchain technology provides the foundation for driving sustainability value that helps validate sustainability claims, access sustainable products in new markets, establish new relationships with trading partners with sustainability certifications and obtain credible sustainability data. It may possibly even provide access to shared enterprise infrastructure in the future that removes barriers between organizations while protecting confidentiality.

A recent EY-Nanyang Technological University white paper, Enterprise blockchain adoption in sustainability: benefits, barriers and future potential, noted that blockchain applications have significant potential to make an impact in three sustainability-related use case categories:

  • Track and trace systems
  • Voluntary carbon credits tracking
  • Renewable energy credits tracking
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Track and trace systems 

Food traceability is important to provide documentation on the source and quality of ingredients used and keep track of food conditions during transportation and storage. Blockchain distributed ledger technology tracks and records relevant data through the entire agricultural chain, potentially allowing various parties in the ecosystem to gain access to information when needed. Technologies such as smart contracts, the Internet of Things, artificial intelligence and predictive machine learning tools can be integrated with blockchain to provide a more holistic system to improve data integrity.

Voluntary carbon credits tracking

Voluntary carbon markets enable individuals and organizations to purchase verified carbon dioxide emission reductions through carbon credits or offsets. Blockchain technology provides transparency and a secure audit trail in tracking carbon credits and offsets ownership. It helps address challenges such as double counting, information asymmetry, verification of additionality, disintermediation of brokers, transparency and market efficiency. It also helps with monitoring, verification and certification. 

How EY can Help

Renewable energy credits tracking

A renewable energy certificate is a verifiable outcome representation that is based on the tracking of energy produced by a renewable resource owner, and it can only be claimed by one consumer. Besides tracking and reducing the risk of double counting, blockchain can also mitigate other key challenges, such as generation-use misalignment, a lack of coordinated application programming interface-led systems, transparency and traceability

With its unique characteristics, blockchain has great potential to make an impact in track and trace systems, voluntary carbon credits tracking, and renewable energy credits tracking.

Challenges of using blockchain 

While there are benefits of using blockchain technology to enable sustainability across supply chains, organizations may face significant challenges in adoption.

Due to the globalized nature of existing supply chains, the technology needs to be adopted across multiple jurisdictions. For organizations in developing countries, the costs associated with blockchain implementation might be too high. In addition, the lack of IT capabilities in these jurisdictions can be a barrier to adoption.

To truly benefit from a blockchain solution, it is important for all stakeholders in the ecosystem to see the value in adopting blockchain technology. As the number of stakeholders across a supply chain or value chain increase, the complexity also increases. Traceability can be hard to achieve in supply chains where an asset must pass through multiple stakeholders. This gets more complicated if digitization is not uniform across the stakeholders.

The garbage in, garbage out problem is noteworthy. If data collection processes are prone to errors, the transparency and immutability of the blockchain will not benefit stakeholders. Therefore, business processes that capture data must be efficient and streamlined. Given the novelty of blockchain, there are still misconceptions that the technology is only used for cryptocurrencies, which can prevent stakeholders from considering it from a business perspective.

Despite these challenges, there is great potential for blockchain technology to improve the performance and efficiency of existing value chains. The current emphasis on transparency, traceability and provenance to help achieve sustainability goals is also expected to drive greater blockchain adoption.

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Paul Brody

    Summary

    Blockchain technology has significant potential to transform business value propositions and enhance sustainability practices. With its unique characteristics, blockchain can support track and trace systems, voluntary carbon credits tracking and renewable energy credits tracking to aid responsible business practices. Despite adoption challenges, enterprise blockchain has the potential to improve value chains and help achieve sustainability goals.

    EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.